Market update: Tech stocks get hammered, Italy sides with the US

31 Jul

by Mihály Tatár

 

Good Morning!

 

  • The ’fleeing the tech’ theme dominated Monday’s trading, in a classic situation of everyone and their grandmother being caught with having the same old long position and retirement dreams (SPX -0.58%, Nasdaq -1.39%, Facebook another -2% extending its drop to -21% – sorry Mark, the golden age of unlimited personal data theft is over – , Google -2%, Amazon -2%, Twitter -8%, Netflix -5%, even Microsoft -2% and Activision -3.5%), erasing about 300 billion USD in wealth. The moves put almost all the stock markets under pressure (DAX -0.48%, CAC -0.48%, Nikkei -0.13%. Shanghai -0.27% – the latter not helped by a weak set of PMI data, showing a marked Chinese slowdown – of course according to the official explanation, the data simply reflects bad weather and deleveraging, and has nothing to do with Trump, keep walking, I said keep walking). Currency and commodity markets were trading in a summerish fashion (EURUSD slightly higher to 1.1715 – some are wondering if Trump complained about the too weak Euro to Juncker -, which, together with the dovish ECB last week, helped interest rate-sensitive currencies, EURHUF 321.50, EURPLN 4.27, EURCZK 25.58, Thai Baht 33.235), while oil edged higher and reached the psychologically important 70  USD level in WTI (69.80, Brent 74.60 USD – the US President won’t be happy, expect some massaging and arm-twisting of oil traders). The victim of the day was the Turkish Lira (4.91 against the Dollar – despite the general Dollar weakness, and investors didn’t appreciate the good news that the Chinese megabank ICBC had to refinance Turkey’s largest energy and transportation projects in the tune of 3.6 billion USD after local banks were unable to tap international markets at reasonable prices), while the Russian Rubel strengthened further with traders seeing high oil prices with a much better US-Russia relationship (RUB 62.20), and the Paksitani Rupee rallied 6%, to 124 per Dollar – a rare feat -, after a report that government officials are already drafting the request for an IMF bailout, targeting a record 12 billion USD in assistance.

 

  • Italian PM Guiseppe Conte visited President Trump in Washington, which, unsurprisingly, resulted in a buddy buddy meeting very different from the usual EU leader- Trump clashes. While Conte declared that the ’Italy and the US are twin countries’, and Trump praised Italy in its crackdown on immigration,  League leader and interior minister Salvini promised to back the UK in trade talks against the EU, giving the united European voice on Brexit a goodbye. (I guess, this will also come handy on the fiscal policy conflict with Brussels.) In the meantime, the Canadian Dollar fell after it was reported that the US rejected attempts by Canada to take part in NAFTA trade talks between the US and Mexico – this development is very telling on the future of international trade talks, and strategist also note that demanding to retain NAFTA trade access to the US market while simultaneously retaining the ability to broker imported Chinese goods in the middle of a US-China trade war was quite a misreading of the situation, and other countries should take notes.

 

 

Have a nice day,

Mihály

 

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